Jean Madar: Thank you, Linda. So regarding China, this is something that we monitor on a weekly basis. We ask our distributors to give us an idea on the most important accounts like Sephora and department stores and also the different digital operators. We are in a much better shape than before, and we see an improvement week after week, quarter after quarter. We think that the inventory will be in at a normal level when we start the year in 2024. But again, with China, you know we have been always super conservative. And I think we’ve been right to be like that because it’s a big country and things are changing super fast. So we’ll take also, even for next year, a conservative approach. But I can definitely notice an improvement in the inventory, that’s all.
Linda Bolton-Weiser: Great. And then without Michel here, I’m not sure if you can answer this.
Jean Madar: I’m going to try. I’m going to — it’s my first. So be nice with me. Just tell me, I will try to answer. But again, if I’m — if I don’t know, I will tell you, I don’t know, and we’ll ask someone in the company to answer you in the next couple of hours. But go ahead, Linda.
Linda Bolton-Weiser: Yes. My question is just with the level of advertising that you’re guiding to in the fourth quarter, it does look like gross margin is implied to be sort of improved sequentially. So I would think it would be higher in the fourth quarter versus third quarter because of less gift sets. Does that sound reasonable to you that it should be higher in the fourth quarter?
Jean Madar: No, I think you can — for gross margin, I prefer that you use the same margin as the first 3 quarters. You don’t — it shouldn’t be higher. But as I said, we will spend a very big amount of money in advertising in the fourth quarter to ensure the sell-through at store level.
Linda Bolton-Weiser: Okay. And then just my final question is about — I know you don’t want to get detailed into 2024 yet, but I’m thinking that Roberto Cavalli and Lacoste can together add $100 million of revenue roughly. Is that about in the ballpark range?
Jean Madar: If Michel were here, he will say he cannot answer because we don’t have but I think that, look, Lacoste has been in the fragrance business, and we have disclosed already how much we were doing with the former licensee, Cavalli also. So I think that it’s a fair number to use for now.
Linda Bolton-Weiser: Okay. Thank you very much, Jean. Thank you. I appreciate it.
Operator: Our next questions come from the line of Ashley Helgans with Jefferies.
Ashley Helgans: Some of your competitors are still taking price. Can you just talk a little bit about where you are in your current pricing journey? And then if you think consumers…
Jean Madar: You’re talking about pricing?
Ashley Helgans: Yes, yes, pricing. Yes, where you guys are with your pricing journey. And if you think consumers are going to start pushing back on price at all? And then maybe any updates you can give us on the travel retail channel.
Jean Madar: Okay. Let’s try on pricing. We took a modest pricing earlier in 2023, something around 5%, which more than offset inflationary expenses during the quarter. And we do not expect to take further pricing actions at this time. But because like you said, we think that some consumers will eventually resist this price increase that, by the way, has been going on for the last 2 years. So we think that our pricing is at the right level. And we will not — except maybe for certain particular SKU, we’ll position it a little bit higher, but this is more for marketing reason, not to offset any inflationary expense. So that’s about pricing. And you wanted to talk about the travel retail. This is your second question?
Ashley Helgans: Yes.
Jean Madar: We see definitely a big improvement for us in travel retail, but again, as opposed to our larger competitors, our business is — our base is small on travel retail, we were roughly at 5% in the beginning of the year, and we are trending now something around 7% or 8%. So definitely improvement, definitely more traffic in the airports. I mean, everybody is traveling, and you can see that business is definitely more active. So we have — we are quite optimistic for travel retail worldwide. If your question is more about travel retail in China, this is, I will say, enough a point also where we want to be conservative, and we are not putting big numbers for travel retail in China or for Chinese travelers. That’s what I can tell you for now.
Operator: Our next questions come from the line of Korinne Wolfmeyer with Piper Sandler.
Korinne Wolfmeyer: Congrats on a good quarter. I’d like to just touch on the guide for the year. I mean, obviously, a pretty big step down in the top line growth for Q4, and I know there’s some really challenging comps, but can you just provide any color on maybe why you’re not pushing a little bit higher for Q4 and kind of what you’re baking into the guidance for the remainder of the year? And then maybe how we should think about the trajectory into 2024? I understand Michel’s not here. So I appreciate any color you can provide.
Jean Madar: I can try. But I knew that you were going — someone was going to ask me this question. We have decided to keep the level of sales at — because as you said in your question, we are against a very strong fourth quarter last year. We have increased the EPS numbers because of the results of the third quarter, of course. But we want to maintain this prudence in our numbers. There is some instability in the world, as you know, 2 weeks ago, a war started in a very important region for perfume, which is the Middle East. So we have to be prudent. And that’s why we prefer to stay conservative in our guidance. That’s what I can tell you for now.
Korinne Wolfmeyer: And then on the advertising and marketing spend, I mean, you’re still planning for that to be fairly heavy. What is your willingness if we do start to see a heavier slowdown in the top line, what is your willingness to maybe pull back on that spend to preserve the profitability of the business? Or is that something that you’re going to continue to invest in even if the top line gets a little more pressure?
Jean Madar: Yes. We will continue to invest. This investment is to ensure that all our retail partners sell out what we shipped them. So we did great in the third quarter because we shipped a lot, a lot of products, and it’s absolutely necessary to maintain or to increase all our expenses to make sure that our retailers worldwide have a great sell-through and we can replenish inventory coming first quarter next year. . So it will be a very short-term vision to reduce advertising to show a little bit more profit. No, we are here for the long term, and we are here to gain market share. So I’m convinced that this is the right thing to do.
Operator: Our next questions come from the line of Hamed Khorsand with BWS Financial.
Hamed Khorsand: Just wanted to see what kind of spending changes have you seen at the retail level going into the holidays? And are you assuming that the retailers are as much stocked as they were last year? Or do you think there’s ample room for them to do reorders in Q4?
